Correlation Between Sonova Holding and Siemens Healthineers

Can any of the company-specific risk be diversified away by investing in both Sonova Holding and Siemens Healthineers at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Sonova Holding and Siemens Healthineers into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sonova Holding AG and Siemens Healthineers AG, you can compare the effects of market volatilities on Sonova Holding and Siemens Healthineers and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Sonova Holding with a short position of Siemens Healthineers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonova Holding and Siemens Healthineers.

Diversification Opportunities for Sonova Holding and Siemens Healthineers

-0.07

Correlation Coefficient

Sonova Holding  Siemens Healthineers

Good diversification

The 3 months correlation between Sonova and Siemens is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Sonova Holding AG and Siemens Healthineers AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siemens Healthineers and Sonova Holding is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Sonova Holding AG are associated (or correlated) with Siemens Healthineers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siemens Healthineers has no effect on the direction of Sonova Holding i.e., Sonova Holding and Siemens Healthineers go up and down completely randomly.

Pair Corralation between Sonova Holding and Siemens Healthineers

Assuming the 90 days horizon Sonova Holding AG is expected to under-perform the Siemens Healthineers. But the pink sheet apears to be less risky and, when comparing its historical volatility, Sonova Holding AG is 1.27 times less risky than Siemens Healthineers. The pink sheet trades about -0.11 of its potential returns per unit of risk. The Siemens Healthineers AG is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,612  in Siemens Healthineers AG on December 29, 2024 and sell it today you would earn a total of  127.00  from holding Siemens Healthineers AG or generate 4.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Sonova Holding AG  vs.  Siemens Healthineers AG

Sonova Holding AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sonova Holding AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Siemens Healthineers

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Siemens Healthineers AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Siemens Healthineers is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sonova Holding and Siemens Healthineers

The main advantage of trading using opposite Sonova Holding and Siemens Healthineers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sonova Holding position performs unexpectedly, Siemens Healthineers can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Siemens Healthineers will offset losses from the drop in Siemens Healthineers' long position.

The idea behind Sonova Holding AG and Siemens Healthineers AG pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.